We all use products or services from franchised businesses every day, from the sub sandwich we eat to the maids that clean our homes. But what is franchising? Simply stated, franchising is an expansion strategy for a business that has a unique product, service or way to do business. The franchisor develops trademarks that are unique to their business so that they can increase their brand awareness. The franchisor recruits qualified individuals to invest, own and operate the franchised business in their area. The franchisee is awarded the right to use the operating methods of the franchise. Training and support is provided so regardless of the market, customers receive a similar product, service or experience. The franchisor receives a royalty from the franchisee and the franchisee keeps the profits of the business. The entire relationship is legally binding by a contract called a “franchise agreement”.
Franchises are everywhere and can be seen in strip malls (food, pack and ships stores, tutoring franchises), office buildings (answering service franchises, business consulting) and even being operated out of franchisees’ homes (service franchises such as floor refinishing, furniture repair, pet services).
Franchising continues to expand as franchisors award franchises to qualified people who want to join their franchise system. Just how does a company become a franchise? Here are the steps most franchisors go through before you even hear of the company.
Franchising comes after a start-up business experiences success. They’ve learned what works and what doesn’t, made adjustments, tried a variety of strategies, tested and re-tested. Finally they have documented results and a system in place and want to grow.
More adjustments are made as a few franchises are awarded and opened, usually in a small number of test areas.
With data coming from a variety of sources, the business can determine what type of marketing works and in what areas. Are customer expectations being met? Word of mouth will make or break any business concept so the franchisor solicits feedback from franchisees customers to ensure quality throughout the system.
Once everything is working well, major expansion of the franchise concept begins. A good franchisor will offer continuing support and training to franchisees, putting as much time into keeping the business on track as they do into growing it.Franchisors provide a safety net for their franchisees: a tried and proven concept with operations, marketing, distribution, accounting, technical support, brand, etc. all in place, tested, retested and ready for a sharp, hard working entrepreneur to join the team.
There are other advantages of franchise ownership beyond having all the systems set up for you. Most franchise businesses will allow someone with little experience in a particular arena to learn new skills, and to build a thriving business using the system provided by the franchise company.